Block 9/2b Kraken (Licence P1077)

Nautical’s first awarded licence in the UKCS is located on the East Shetland Platform, west of the North Viking Graben. The Kraken structure is a large 3 way dip closed high on which oil was discovered in the Heimdal Sandstone Member of the Tertiary (Palaeocene) system by the 9/2-1A well drilled in 1985 and successfully appraised by the joint venture’s 9/2b-2 commitment well in 2007. This appraisal well not only encountered oil bearing Heimdal Sandstone which correlates with the 9/2b-1A well (known as Unit III sands) but also penetrated an additional thin lower oil bearing Heimdal Unit I sandstone.

The results of 9/2b-2 proved an oil column of at least 77m and an oil down to (ODT) 51 metres deeper than 9/2-1A. A third appraisal well, drilled in September 2008, was located in a down dip area to the northeast of the discovery wells in order to substantiate the oil column by intersecting the oil water contact and to investigate the upside (P10) resources. However, in this outlying area, the Heimdal Sandstone Member proved to be absent, which limits the northeastern upside and curtails the best estimate contingent resources to 83mmbo (29mmbo net) in the core area and to the north and south of the 2 successful wells. There are additional best estimate prospective resources of 114mmbo (40mmbo net) to the west of the fault, above the ODT in the 9/2b-2 well.

The reservoir quality in all sands was excellent, exhibiting both high porosity and permeability. Gravity of the oil is 15° API and viscosity is around 110cp or less, being a higher API and much less viscous than both Bressay (1,000-1,500cp) and Bentley (>2,000cp) and more similar to the producing Captain Field which is expected to exceed a 50% recovery and continues to produce at around 25,000bopd.

The fact that an oil water contact (OWC) was not encountered in the 9/2-1A and 9/2b-2 wells enhances the probability that the aquifer support will be through an edge water drive rather than a bottom water drive which allows improved control over water production and injection thus optimising oil production and ultimate recovery from the reservoir. This is supported by geochemical analysis which indicates that, although the oil is biodegraded, it is not water washed implying the water leg is remote from the core of the structure.

Utilising both regional seismic and sedimentology; sand body distribution modelling has been completed and we have concluded that the Heimdal sands sourced from the west have been channelled southwards along the topographic low created by the Kraken fault. Additionally a Controlled Source Electro Magnetic (CSEM) survey has confirmed an anomaly over both 9/2-1A and 9/2b-2 wells which extends to the west of the fault and to the south of the 9/2-1A well.  There is a possibility that additional Heimdal sands have been deposited to the west of the fault and more generally towards the south of the present discoveries.

As a consequence of the completion of this technical work Nautical has contracted the Ocean Nomad semi-submersible rig to drill the next well, which is scheduled to spud in August 2010. The drilling actvity will consist of a primary appraisal well plus an exploration sidetrack, which will both confirm the southern extent of the eastern hydrocarbon accumulation and investigate the prognosed additional sands on the west of the fault, with the expectation of increasing the contingent resources. The primary appraisal well will be designed to recover core and obtain fluid samples, with the aim of providing data which will optimise the field development. 

Nautical’s joint venture partner, Canamens Energy North Sea Limited (“Canamens”), has chosen to not participate in the upcoming Kraken activity.  As a consequence the Company will fund 70 per cent. of 9/02b-D as opposed to our 35 per cent. interest. The other joint venture partner, Celtic Oil Limited, is participating at their full 30 per cent. interest.  Under the terms of the Joint Operating Agreement, Canamens are able to buy back into 9/02b-D. However, to do so, Canamens will have to pay Nautical two times their 35 per cent. equity interest, on the well and testing costs, to be entitled to participate fully in the development. 

In anticipation of a favourable result from the appraisal well, development planning and concept selection studies are already underway. Our current plan foresees a phased development initially targeting the resources in the core area to the east of the Kraken fault.  We are reviewing the market for development equipment to identify what could be available to enable Kraken to be brought onstream in an accelerated time frame. Encouragingly, as part of Nautical’s marketing initiative, an assay has been carried out by a refiner who has expressed a strong desire to purchase Kraken crude. Assuming success of the next appraisal well, our plan remains to submit an FDP before year end, with the anticipation of first oil in 2012.